Plastics Industry Perspective
4th Quarter 2013
Resin distributors volumes softer
than anticipated
Most distributors of plastic
resins experienced sales volumes below budgets in 2013.
After a couple of years of high
single-digit or low double-digit
growth, most distributors were
anticipating another year of high
single-digit growth in 2013. Two
reasons for lower growth rates
than expected in 2013 were
resin availability and continued
slow economic growth.
Resin availability has declined as producers have rationalized product lines; they also
appear to be producing closer
to customer needs than before. Both factors have had a
negative impact on supply for
distributors due to fewer resin
grades being available, as
well as tighter supply.
General slow economic
recovery coupled with uncertainty with state and federal
government policies has
caused many companies to
hold off on production capacity investments.
Resin distributors expect
significant growth over the
next five years, as additional supply of PE, PP, PVC, and
PET are expected to come on
line in conjunction with North
America being a low-cost region. Growth will come from
additional supply, new suppliers, reshouring, and capacity
investments. Most distributors
are forecasting high single-digit
growth rates in 2014, but the
challenges in place in 2013 are
similar to those that will be in
place in 2014.
The graph shows pricing
changes of the major resin categories over the last year compared to crude oil prices, which
is traditionally a primary driver
of resin prices. PP continues to
be the most volatile resin. Oil
prices remained basically flat in
2013, while the price of most
resins increased during the
year. Tight inventory supply and
successful profit taking by the
resin producers were main
headwinds faced by resin distributors in 2013 and all indications point to them continuing
into 2014
Kevin Duffy is a Senior Inventory appraiser who specializes in the plastics industry. He
has appraised numerous plastics-related companies in North America that are involved
in distributing, compounding and manufacturing resins, films, sheets, and molds. Kevin
received his B.A. in finance from Illinois State University, and passed the CPA exam in
Illinois. Kevin has diverse business experience in
accounting, banking, manufacturing,
distribution, and retail.